MR. MCCURRY: Good afternoon, everyone. I think, as you
all know, earlier today, Ambassador Charlene Barshefsky, in Beijing,
along with Chinese authorities, announced that arrangements have been
made that will allow for the enforcement of the 1995 Intellectual
Property Rights Agreement between the United States and the People's
Republic of China. You heard the President earlier today welcome
that news and say that it is a good understanding that is now in
place.

And to talk about it further, I've asked Dr. Laura
Tyson, who is the National Economic Advisor to the President and
Chair of the National Economic Council, to be here, along with
Secretary of Commerce Mickey Kantor. It's a pleasure to have both of
them here.

Laura, Mickey, the podium is all yours.

DR. TYSON: Thank you very much. I might also say that
afterward there will be Jennifer Hillman of the USTR, and Leal
Brainard of the National Economic Council and National Security
Council, will be outside at the awning to answer any technical
questions that we want to hit over to them.

As you know, Ambassador Barshefsky did announce this
morning in Beijing that China is taking significant action to
implement the 1995 Intellectual Property Agreement. The Chinese
authorities have announced that they've already
closed 15 pirate CD factories, producing an estimated 30 million to
50 million pirate disks a year. And they've already closed six major
distribution centers, and they have announced a ban on equipment --
import of equipment used to manufacture CDs.

Now, I'm very pleased to report that these actions by
China to enforce what was an agreement made in February of 1995 on
intellectual property will avert the imposition of sanctions on $2
billion worth of Chinese imports. Those sanctions would have been in
neither country's interests.

This important agreement represents the culmination of
tireless efforts by Ambassador Barshefsky on behalf of the U.S.
industry, and I want to take an opportunity to congratulate her for
this significant achievement. From the start she has worked closely
with the U.S. industry. Many representatives have been here today
and they have voiced their strong support for this agreement.

I want to emphasize that this agreement, like our other
trade agreements with China and our other trading partners, reflects
the President's fundamental approach to trade issues. He has
consistently stood firm for American industry and American companies,
American workers, insisting that our products be granted fair access
abroad. China's actions today are consistent with that goal of fair
access abroad, and will protect some of our nation's most dynamic and
competitive industries.

Finally, I want to say this -- President Clinton's
policy of engagement with China is working. China's actions in this
area confirm the wisdom of our policy of engagement. We will
continue to insist that our trade agreements with China, including
this Intellectual Property Agreement, are fully enforced, using all
of our appropriate tools.

Now, we'll turn to a discussion of the particulars of
the agreement. As you will remember, Ambassador Barshefsky went to
China in April, laid out four specific areas for action, and in each
of these areas there has been significant steps forward, with the
understanding reached today. The Chinese have taken steps to close
pirate CD factories. They have taken steps to seize shipments of
pirated goods. They have taken steps to strengthen enforcement in
areas where piracy is concentrated, especially the Guangdong
Province. And they have instituted concrete measures to give
American intellectual property producers access to the Chinese
market. So they've moved significantly in all four areas.

And now I'd like to turn over to Secretary Kantor to
talk about the particulars.

We are, of course, very pleased. We've gone from the
abstract to the concrete. Enforcing intellectual property rights in
any country is complex, and enforcing this agreement has been
particularly so that we've had nine trips to China and 40 different
meetings. And Ambassador Barshefsky and her team are to be
congratulated, they have done a fabulous job. This is a real and
significant concrete step forward.

First of all, there were four plants previously closed
-- so we can get the inventory correct -- 12 more licensed plants
were closed as a result of this agreement. And that has been
verified. And three underground, so-called "underground" plants have
been closed, for a total of 19, only 16 of which are licensed, three
of which are underground. There were 31 licensed plants.

The 15 remaining plants are under the agreement, being
investigated actively by Chinese authorities. That will be the
Ministry of Public Security, which is a major new step in the right
direction. The Ministry of Public Security is taking over both the
enforcement and monitoring of this agreement from the Press and
Publications Administration. Therefore, it has been put in the hands
of Chinese law enforcement.

In addition to that, all additional underground plants
will be closed when they are found. That's an absolute commitment.
A third step, there will be -- they will stop the shipment of presses
at the border, also work with Hong Kong authorities in that regard --
all new presses that would go to plants, which would increase the
production capability of these plants. And fourth, this is all under
plant closures. There will be no new licensed plants until further
notice, all of which are important.

So no new licensed plants; stop the presses at the
border; close all underground plants; four plants have already been
closed; 12 new licensed plants closed; and, of course, three
underground plants closed in addition.

Special enforcement period that has been implemented.
By the way, under that, six wholesale operations were just shut down,
including the largest one in China. That's a big step forward. Five
thousand laser disc theaters have been shut down. A nationwide
special enforcement period has been implemented through August, and
seven months special enforcement period implemented in Guangdong
Province.

Border enforcement, I talked about to some degree.
They'll cooperate with Hong Kong. They have been seizing tens --
meaning China -- tens of thousands of these compact disks, laser
disks and others which would go to third markets, which would hurt
U.S. jobs and U.S. businesses. And no presses can be, as I said,
imported in the country unless they're officially approved.

On market access, there is market access agreements in
the sound recording, motion picture and software area. In motion
pictures, for instance -- I saw Jack Valenti back here just a second
ago -- in motion pictures, for instance, they have taken away all
quotas. All quotas are gone now. You can import as many films as
will be agreed to under this situation. And they have implemented a
new monitoring and verification system, which is extremely important,
including new SID codes, which are the signatories where you can --
if each disk much have a stamp on it to show where it was made, and
with a title verification system connected to the signatories and
24-hour monitoring at the plants -- they will report on a 24-hour
basis -- the production of the plant will be able track through U.S.
law enforcement authorities what's going on in China.

All of these are major steps forward. And, again, let
me say Ambassador Barshefsky, Lee Sands and the team there have done
a really superior job. The President's policy is working. We need
to continue to be vigilant in our monitoring of this and other
agreements with China and with others, as well. But the question of
constructive engagement and taking responsibility is making a big
difference.

We'd be happy to answer questions.

Q What exactly would you say changed? Because up
until recently they were saying it's virtually impossible to control
all of this -- a huge country, we can't get everywhere. What
changed?

SECRETARY KANTOR: I think two or three things, frankly.
I think there was a recognition in China that the President's policy
of constructive engagement was important to China and important to
stability in the region and important to China's future. And China
did ont want to do anything to harm that policy.

Second, they understand if they're going to be part of a
trading system and take advantage of U.S. markets, as they have,
we're going to insist that we begin to have the same kind of access
to the Chinese markets. And that policy of responsibility was one
that we were committed to.

Q Is there any guarantee we won't be back there a
year from now, going through the same situation?

DR. TYSON: It's important to emphasize that we believe
that there have been things already done here. I think that's the
first thing we want to emphasize. The situation has changes. Plants
have been closed. Both the -- we have had the 12 plant closures and
then we had three underground plants discovered and closed. There's
a commitment on a per se basis to have all underground facilities
that are found closed. There is a ban on the import of equipment.
There are monitoring devices put in place at this point that will
handle the problem much more effectively than has been the case
before.

Having said all that, we want to emphasize that these
are significant steps. This is real progress. But the enforcement
of intellectual property rights, not just in China but around the
world, is a long-term process. We will be working with the Chinese
until their system of enforcement is self-sustaining. So progress,
significant steps, an improved situation, but a long-term challenge.

Q How will we be monitoring their enforcement? In
the February 1995 agreement -- couple paragraphs said that seven
facilities were shut down. Clearly, they weren't. In what way will
the United States authorities be able to monitor the enforcement of
this agreement now?

SECRETARY KANTOR: Well, two or three ways. Number one
is they have agreed to share data which is coming from these plants.
They will have inspectors in the plants on a 24-hour basis. That
data will be transmitted not only to Chinese authority but to U.S.
law enforcement authorities as well. That's number one. Number
two, they're going to allow U.S. industries to make verification
visits, which is a big step forward, and different. And third, the
SID codes connected title verification system will make a difference
as well.

I did want to say one word about the question before.
We will be hear a year from now. I don't know about you.

Q Those other 15 plants, can you please explain why
they're not being shut down now?

DR. TYSON: They are all under investigation. And it's
important here to emphasize that the issue not that all plants had to
be closed but all illegal activities in plants had to be shut down.
That has happened in part through closing facilities whose activities
were illegal. There are other plants where investigation will -- and
with monitoring, 24-hour-a-day monitoring, will determine which
activities, if any, are illegal. And those would be closed down.
The plants don't necessarily have to be closed down. They need to be
investigated and they need to be monitored on a continuous basis.

Q That sounds like the Chinese explanation. I mean,
do you accept that? Do you accept that of the 30, only 15 or so were
doing completely illegal activities?

DR. TYSON: It is not -- I would not say it is -- my
answer should not suggest that there would not be other full plant
closures. My answer should only suggest that the remaining plants
are under investigation at this point to determine which, if
necessary, should be closed.

Q Ambassador Barshefsky said at one point that
virtually all of these plants were engaged in illegal activity.
Shouldn't they all be closed?

DR. TYSON: Well, again, let me draw the distinction
between engaged in illegal activity and fully engaged in illegal
activity. That is, the issue here is if you have 24-hour-a-day
enforcement reporting to monitors that -- and reporting to us, then
the issue is, would a plant stay open because some of its activity is
perfectly legal. And the issue of whether a plant would actually be
closed or curtailed in some way is the issue that is under
investigation.

Q Dr. Tyson, what is the bottom line? How much
piracy is going to continue under this agree?

SECRETARY KANTOR: Let me -- I can just give you some
numbers. There have been estimates, and these are only estimates,
from industry and other sources, that 80 million to 200 million, if
you want to take the largest estimate, which we don't believe is
correct, but 200 million of these CDs, CD-ROMs, video disks, laser
disks, being produced every year. The plants that have been closed
-- verified closed under this agreement -- represent about 30 to 50
million in production. Now, you have the range here, 30 million to
50 million, or 80 million to 200 million. Now, you can make any
assessment that you wish from that.

It is significant under anyone's assessment, this step.
And this is very concrete. And it's significant for two reason.
One, 14 months ago, of course, all of these factories are operating
without verification, without monitoring, there were underground
plants being set up, presses were coming into China without being
stopped, and of course disk and laser disk and others were being
exported without being stopped. All of that is now not only under
scrutiny, is now under concrete action by the Chinese government.

This is a big step in the right direction. However, we
have to continue to monitor and verify and make sure this agreement
is working as it is at this moment.

Q Were any of those licensed plants licensed since
the last agreement was reached?

SECRETARY KANTOR: You know, I don't know the answer to
that question. I really don't. It is -- you might ask Jennifer
Hillman later. I'm sorry I just don't know. We know there were 31
licensed plants at the time when these last discussions started. We
know four had closed in the last few months. We know there's 12
more, and then we knew three underground. But I don't know that. I
really don't know the answer.

Q -- underground plants?

SECRETARY KANTOR: What's that?

Q Did the government have any -- either local
government or national government -- have any connection over
knowledge of the underground plants?

SECRETARY KANTOR: We have no facts that would support
the one way or the other.

Q -- come in at any point to destroy any of the
equipment that is in the 15 plants that were closed? And can you
describe in a little more detail the exact nature of this monitoring
system and whether we attempted in the negotiations to have American
monitors placed in those plants, rather than have Chinese nationals
doing the monitoring?

SECRETARY KANTOR: First of all, they have revoked in
each of these where there are permits the AV, audio visual, permits,
or local business license. As you know, the AV permits, as you know,
come from the central government; the local licenses come from the
local government. Those have been revoked where those existed. Now,
in the three underground plants, they didn't have them. That was the
problem.

Second, they have seized and confiscated materials and
machinery to manufacture parody of products, including destruction of
CD molds and other equipment. And, third, they're investigating and
prosecuting individuals -- 30 have already been prosecuted connected
with these plants; 40 more are under active investigation as we stand
here today.

Q Thirty individuals?

SECRETARY KANTOR: Thirty individuals, in addition to
the -- 30 have been prosecuted and 40 now are under active
investigation, in addition to the 30. That's a total of 70.

In the verification -- I don't know how much detail you
want to go to, and I'm prepared to do so if you wish. Part of that
is part of your circular. I will be glad to go over it. But that
has to do with -- the monitoring and verification has to do with a
24-hour -- people in those plants 24 hours a day providing
information and data not only to Chinese officials, but to U.S.
officials.

Q Did we attempt to make sure that there were any
American monitors placed in the plants?

SECRETARY KANTOR: We thought it was sufficient to have
the data transmitted, plus to have the industry verification visits
approved, in connection -- and then with an SID system and a title
verification system, that that would be a very strong, concrete,
enforceable system.

Q Did you seek at any point to have American monitors
placed in the plants?

SECRETARY KANTOR: On a full-time basis? No.

Q Excuse me, the administration --

SECRETARY KANTOR: We have had American monitors, you
know, go into those plants, as you know. Obviously, that's how we
verified the existence of a number of these plants.

Q The administration went out of its way to say that
there were powerful people involved in some of these plants, the
Chinese army was involved, identified in some of them. And I wonder,
has any effort been made to close down the plants that are owned by
ministries and the Chinese army, or will we be allowing those to
remain open?

SECRETARY KANTOR: First of all, we never identified any
particular entity as having ownership or an interest in these plants,
either in the past, present or certainly in the future.

Number two, we have been concerned, of course, about
ownership and control of these plants and the Chinese government's
commitment to live by the agreement reached on March 12, 1995 --
signed in February and then finally signed on March 12, 1995.
However, we have no information with regard to the particular
interest you cited in your remark.

DR. TYSON: Can I say one other thing that was remarked,
I believe quite intensively in the Chinese briefing given by
Ambassador Barshefsky, and that is this is the first time
that the Ministry of Public Security in China will be taking an
active role in the enforcement activities. And I think that signals
they have instituted a new campaign against crime, and they have
instituted --have identified IPR violations as an important part of
this campaign.

So we have a new law enforcement type agency in the
Chinese setting involved in this, and that, with a number of other
things, really changes the context here. It's not to say, again,
that we need -- we need to continue to be vigilant and continue to
work with the Chinese on this issue. Making progress does not mean
the problem is solved; it means what it is -- making progress.

But there are a number of things that have changed now,
in terms of reporting and in terms of who would be in the factories
and in terms of responsible agencies who are involved in the
enforcement effort. And that should, we believe, represent progress
going forward.

Q Mr. Secretary, Jack Valenti was telling us outside
that this agreement does not bar continued Chinese censorship of
American movies going into China. Can you shed some light on the
kind of censorship they have? Is it political based, culture based,
both? And how serious is it in terms of access?

SECRETARY KANTOR: In the past it has been both
politically and culturally based, based on Chinese law. And, in
fact, of course, they retain the right to censor in the future. The
fact is, by getting rid of the quotas and no longer maintaining them
and allowing for the importation of motion pictures unrestricted in
that regard, we have made a big step forward. But you're correct,
and Mr. Valenti is correct, of course, that this censorship -- or
potential censorship is a better way of putting it -- of course,
still exists under Chinese law.

Q Some of the industry people also were saying that
this agreement could open the way for significant joint business
partnerships, U.S. with the Chinese, to produce disks and software
and movies there. Can you give us any kind of quantitative estimate
or other projection of how much business American entertainment
industry will now be able to generate with partnerships in China?

SECRETARY KANTOR: I would not qualified to give you
that kind of estimate. I think the industry folks would be the best
qualified to do that. All I can tell you is in the music area and
the movie area and the software area, those kinds of projects could
be undertaken under this agreement, or under this agreement, or under
this extension of the 1995 agreement, including, we hope, projects
for renovation and building of theaters and other matters such as
that.

However, the specific authorizations in this agreement
are very broad and not, however -- they are very broad in terms of
music, movies, and software, and will allow for that potential. How
much of that will be realized is certainly -- the industry would be a
better estimate and that, of course, we will see in the future.

Q Secretary Kantor, with the amount of piracy that
you think will still go on, does it make the market opening end of
this agreement not all that worthwhile?

SECRETARY KANTOR: Oh, it's just the opposite. To the
extent you open the market, you make piracy less productive and
profitable, and you make the market end more profitable and
productive. Therefore, the Chinese will have an interest in cracking
down on piracy. The more involved we are together marketing in China
in each of these three areas as well as other areas -- it's just the
opposite, frankly.

Q Mr. Secretary, you have officals today with many of
the nation's largest retailers as well as importers who lauded the
agreement, but said that they were very concerned that the fact that
apparel was such a large percentage of the proposed sanction list,
that, one, they have been hurt economically already, and two, this
will make an inviting target should this ever come up again in the
future. Your comments, please.

SECRETARY KANTOR: Well, we chose the list in order to
make it clear to the Chinese this was serious and it would have a
real effect upon their behavior. The fact is that a large part of
Chinese exports to the United States are textile and apparels, number
one. Number two, the fact is that because of quotas around the
world, if the U.S. market became limited if we had imposed the
sanctions, as you know, they would not have many alternatives.
Third, these are made and produce in Guangdong Province where most of
the piracy is going on, so the same area that is producing the piracy
would be most affected by this. And number four, of course, this
industry had more alternatives than almost any other industry in
terms of sourcing either from the United States or from the Caribbean
or from Latin America. So therefore, it made sense in this case to
develop the list in the way it was.

What would happen in the future would be mere
speculation. We hope and assume this agreement will be adhered to;
therefore, there will be no need to do this again. Although, we will
continue to monitor, legally under Section 306 -- that's what happens
under 301 action, you suspend the imposition of sanctions, you
monitor the Section 306.

Q Just a follow-up question on that monitoring point.
Have you set a specific date by when you'll review China's
compliance, or a regular period, compliance review periods?

SECRETARY KANTOR: We do it continually.

Q Mr. Secretary, does today's action on the part of
China make the Sino-American relationship on a tack of more smoother
sailing? And would it tend to -- would it make you more likely to
support a possible presidential visit to China?

DR. TYSON: I think what this action shows is that we
have many interests with China that we have -- the President has
chosen a policy of constructive engagement with China; that that
involves using various tools that are most appropriate to the
interests at question. Here was a case where we used our existing
trade policy in an effective way to get results which we believe not
just in our interests, but let me emphasize, as with all our trade
agreements, we believe that these agreements are actually in the
interests -- they're win-win situations; in our interests and in the
interests of our trading partners.

So I would say we really want to emphasize that this
result shows the wisdom of the general approach to China, which is
one of constructive engagement.

Q What about the provinces? I mean, the central
government is one thing, but the provinces have sometimes gone off in
their own direction regarding enforcement and just about everything
else. What guarantees do you have that the provinces will be held in
line?

SECRETARY KANTOR: Well, one of the things -- just let
me give you a very concrete example in this agreement -- we're going
to have a seven-month special enforcement period in Guangdong
Province alone, in addition to the special enforcement period in the
whole nation which will go through August. We'll have seven months
in Guangdong Province.

As you know, the one thing that worked well in 1995, the
first year of the agreement --'95-'96 I should say -- was a special
enforcement period. They literally -- the Chinese government
confiscated and destroyed hundreds of thousands of these disks, CDs
and so on. So that worked well. That's one concrete example of the
provinces being involved.

Q Do you have any way to assess the political impact
with this on the MFN fight on the Hill?

SECRETARY KANTOR: All I would say is I think this is --
for those on the Hill who are looking at this question of China,
constructive engagement is working. Both sides have to take
responsibility -- the Chinese did in this case. We're pleased with
the results. I think this shows that when you constructively engage
with China and insist on standing up for U.S. interests, that both
side can win and both sides can be benefitted. Therefore, I think
it's probably going to help on the Hill.

Q Are there any other trade disputes coming with
China?

MR. MCCURRY: Two more questions -- here and then back
there.

Q Are there any other trade disputes looming with
China?

DR. TYSON: What do you think? (Laughter.)

SECRETARY KANTOR: Oh, don't get me started.
(Laughter.) No, they -- nothing of an immediate nature. However, we
continue to have some concerns about industrial market access and
agricultural market access. We continue to engage the Chinese in
discussions about their accession to the World Trade organizations.
We have specific sectors and commodities that we discuss on an
ongoing basis. But nothing of the magnitude of what we just went
through.

Q Will the agreement that you announced today have
any effect on those issues that you cited in terms of trying to
resolve those problems?

SECRETARY KANTOR: I hope so. I hope China now
implements those agreements on market access as they've implemented
this agreement on intellectual property rights. It would be very
helpful.

Q Is China due to become a WTL member soon?

DR. TYSON: What?

Q Aren't they due to become a WTL member soon?

DR. TYSON: We have given to China -- actually,
Ambassador Barshefsky has presented them with a blueprint of
guidelines of actions they need to take in order to enter the WTO
accession on commercial terms.

Incidentally, it includes some issues on intellectual
property rights. And when we say this agreement is a win-win for us
and for China, one of the decisions we believe the Chinese are making
is their recognition of the need really to adhere to international
rules of the game and things like intellectual property rights in
order to become a member of the international trading community.

MR. MCCURRY: Last two right there.

Q Secretary Kantor, I'm wondering today you're
emphasizing the use of U.S. trade law in the enforcement of this
deal. To what -- and Ambassador Barshefsky has previously said how
difficult it is for us to press these issues with Europe and Japan
standing on the sideline. Will you be making any specific or renewed
effort to gain international support to bring to bear more pressure
to live up to IPR rules?

SECRETARY KANTOR: Well, we would be pleased and it
would be helpful if Europe and Japan would join us in an overall
attempt to protect intellectual property rights around the world. We
will continue to follow this policy regardless of what Europe and
Japan do. However, we would welcome their active and full
participation.

Q -- seeking it with a new initiative?

DR. TYSON: Can I just say one thing on that issue
related to the question I answered a minute ago, which was on the
WTO? It's important to emphasize that on the issue of the terms for
Chinese accession to the WTO that there is unanimity among those
trading nations responsible for making that decision. So there is
one area, for example, where we are working together -- the U.S.,
Europe, Japan, other trading nations -- to make sure that China's
accession to the WTO occur on commercial terms.

MR. MCCURRY: Last question.

Q Secretary Kantor, you and Ambassador Barshefsky
cited several times that the Hong Kong and Taiwanese investor
involved actively in those illegal activities in China, mainly in
those CD plants. I wonder, can you tell us that in those plants
being closed -- I'm talking those 15 -- how many of them are Hong
Kong invest or Taiwan invest? And then in this press release, it
specifically mentioned that the cooperation from Hong Kong -- I'm
just wondering, do you obtain cooperation from Taiwan?

SECRETARY KANTOR: We have called upon Taiwan to
cooperate and to be as active as Hong Kong has been, not only in
terms of the shipment of pirated goods from China through those areas
to the rest of the world, but also do what Hong Kong has done, and
that is actively consider -- and they have indicated to us they will
pass a law in Hong Kong which will find it to be a crime to involved
in illegal activities on the Chinese mainland. And this, of course,
would be one of them. This was introduced in Hong Kong by the
authorities there as a result of the investment by certain Hong Kong
residents in these pirate factories.

I would have no comment about the ownership of these
particular plants. I think that would not be helpful.